As a brick-and-mortar or online retailer, you must take steps to protect your business from common retail risks. Companies are faced with inherent risks, mainly because the retail industry is faced with changing trends and designs. Retail managers are encouraged to embrace dynamics like changing consumer preferences, vast online options, and global economic uncertainty.
They have to balance several factors like quality, price, brand image, location, marketing skills, and expense tracking. They mostly have to be wary of cybersecurity risks that threaten to siphon off private data. Here’s a list of the top risk factors managers must learn and keep a close eye close on.
Data Breaches and Digital Theft
According to a TransUnion blog post report, cyber fraud stands at approximately $31 billion in 2020. Digital criminals mainly target online retailers in several ways. For example, they use phishing scams to convince unsuspecting employees to reveal their credit card information.
An attack disguised as a distributed denial-of-service can send a company on its knees by crippling its servers and preventing transactions. It overwhelms a website with hundreds of requests from IP addresses that are probably compromised.
Once the website is overloaded, it slows down and temporarily goes offline. Customers can’t access the website or complete orders, and this leads to loss of business. Criminals can also hack the physical point-of-sale systems of brick-and-mortar retailers.
A retail manager can manage this risk by replacing the outdated PoS equipment. It’s also recommendable to hire cybersecurity specialists to audit the software and systems.
According to a Verizon report, 34% of the cyber-attacks in 2019 were facilitated by internal employees. Employees are increasingly becoming easy targets for intentional and unintentional data leaks. Retailers need to have policies about the use of personal USB devices at the workplace. In the past, these have been used to capture massive information that helps fraudsters attack a business.
Businesses that store goods in warehouses can be affected by weather events and natural disasters. Natural disasters not only damage physical structures but also frequently cause power outages. This results in product losses, especially for retail outlets that sell perishable goods.
A retail risk management strategy entails purchasing commercial property insurance and customizing it accordingly. Some general retail insurance policies can also cover inventory damages.
Physical Theft of Items
Retail store operators have been faced with the risk of losing items to shoplifters and criminals for a long time. Data from the National Retail Foundation shows that retailers incurred theft losses of more than $50 billion in 2018.
Retail managers can thwart this risk by installing physical security systems like sensor-product tags and labels. They should also invest in video-monitoring equipment and locked display cases for small valuable items.
It’s also crucial to train employees to be on the lookout for shoplifters. Some traditional telltale signs of thieves include attempting to distract employees, switch price tags, and move in large groups. A good risk management strategy entails purchasing industry-specific inventory insurance covering fires, theft, and other losses.
Not Monitoring Competitors
Failing to monitor the activities of your competitors may not be an obvious risk. However, it can put your retail business in jeopardy if you lose your customers to your rivals. For example, a grocery retail business with no online business can check how its competitors are performing on social media platforms.
If most of the rivals are marketing themselves online, it would be wise to establish a digital presence. It also helps to research their prices to develop a competitive pricing edge.
Lack of Technical, Communication, and Negotiation Skills
For many retail businesses, having a balanced mix of these skills is usually just wishful thinking. It’s not uncommon to come across professionals with excellent technical but no communication skills. Others are great at relating with customers but can’t defend their products as they lack the necessary knowledge.
While technical skills are easier to develop than soft skills, the latter is more important in influencing customers. The ideal risk manager must know how to relate with people as much as they know about their products.
Retail businesses face the risk of forced closure due to several factors. For example, disasters like coronavirus can lead to unplanned closure or loss of income. Vandalism or fire outbreaks can also lead to an untold loss of a steady source of income.
Consider getting business interruption insurance that protects unforeseen closure. Unfortunately, losses due to Covid-19 might not be covered in such policies.
Avoid the temptation to cancel your business insurance if faced with closure amid a pandemic. This could lead to more damage in the long-term as it leaves your business unprotected against other risks.
A retail manager can’t afford to ignore risks that face a retail business. Retail stores have a substantial investment in equipment and inventory, alongside the physical structure. All these require comprehensive vulnerability management solutions.
Check out PAZO